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VECCMS (vitamin enhanced chocolate coated marshmallows) failed to gain distribution in most health food stores, but Paul was determined to pursue his dream of
VECCMS (vitamin enhanced chocolate coated marshmallows) failed to gain distribution in most health food stores, but Paul was determined to pursue his dream of marketing a good-tasting snack food that would include minimum daily requirements of most vitamins and minerals. He sold them in 16oz resealable bags through independent grocery stores throughout the Mid-Atlantic. Paul's Selling prices to wholesalers of $1.00 a bag resulted in a contribution margin before advertising and promotion of 34%. Wholesalers sold to retailers and retailers to consumers, earning margins of 25% and 50% respectively. Sales are currently 1,200 bags per week. Paul is considering distributing 1 million free standing insert (FSI) coupons for $0.20 off the regular price and expects to pay $4 per thousand for artwork and distribution. Each coupon redeemed will cost an additional $0.03 in processing fees. What percentage lift would be required for Paul to break-even on the promotional allowance program where when retailers reduce prices by 10%, Paul will pay them $0.10 per bag sold at the reduced prices?
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To calculate the percentage lift required for Paul to break even on the promotional allowance program we first need to determine the total cost of the promotion and then find out how much additional r...Get Instant Access to Expert-Tailored Solutions
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